1 week ago
States’ Off-Budget Borrowing Raises Concerns Over Fiscal Transparency
Some state governments are borrowing money in less obvious ways.
These loans are called off-budget borrowings.
They can be useful in some situations.
However, people may not see the full amount a government owes if these borrowings are not clearly reported.
Ranen Banerjee from PwC India said the liabilities should be shown separately in the budget.
This would make the government’s total debt easier to understand.
It would also give policymakers better information.
Clear reporting may help discourage excessive spending caused by populist pressures.
States are using off-budget or indirect methods to borrow money.
The practice has raised concerns about transparent reporting of government liabilities.
Ranen Banerjee of PwC India said such borrowing can sometimes be necessary.
He urged governments to disclose off-budget liabilities as a separate budget line item.
Transparent reporting could help policymakers limit fiscally imprudent spending driven by populist pressures.
- Who
- State governments and Ranen Banerjee, a PwC India economic adviser.
- What
- States are using off-budget borrowings, prompting calls for clearer disclosure of their liabilities.
- Where
- When
- Why
- Transparent reporting is needed to show total government liabilities and help limit fiscal profligacy.
Key facts
- Issue
- States using off-budget borrowing methods
- Potential role
- Off-budget borrowings can be necessary in some situations
- Recommended disclosure
- Report off-budget liabilities as a separate line item in the budget statement
- Transparency benefit
- Shows the government’s total liabilities more clearly
- Policy benefit
- Gives policymakers a reference for monitoring government finances
- Concern
- Fiscal profligacy driven by populist pressures
- Quoted expert
- Ranen Banerjee, partner and leader of economic advisory at PwC India
Quotes
Ranen Banerjee
Partner and leader of economic advisory at PwC India
“Off-budget borrowings can be necessary under many situations. However, transparently reporting the quantum of off-budget liabilities as a separate line item in the budget statement is important. This creates a transparent reporting of the total liabilities of a government and is also a good report for the policy makers to refer to, which can keep the tendencies of fiscal profligacy owing to populist pressures under check.”
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